The Bear Case

February 27, 2009 at 2:24 am Leave a comment

Back in January, I wrote that based on historic P/E ratios of around 10 at the bottoms of major bear markets, the market may drop another 50%.  This article makes essentially the same argument and makes a case that S&P can end up 35% lower from today’s levels.

Of course, no one knows whether such dire predictions will come to fruition.  It is my belief, however, that it pays to concentrate on individual stocks in your own portfolio rather than on general market.  And there are many stocks out there today with P/E ratios significantly below 10.  Also, overall P/E ratio is currently inflated by huge losses from financial companies, and therefore is not truly indicative of market valuation.

Entry filed under: Market Conditions.

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Blog Author

Leon Shirman's long-term investment philosophy is summarized in his book, “42 Rules for Sensible Investing”, also available from Amazon.

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